In Azure Stack, Microsoft Sees the Foundation for Enterprise Clouds

There was an old rule about Microsoft software: never use it until version 3. The generalized axiom is that it takes Microsoft a while to get things right, however once the company sets its mind to something, you can expect big results. While every rule has an exception, mobile in this case, Microsoft’s history with PC UIs, the Internet, search, Apple software and most recently the cloud show that it’s seldom first to market, but capable of stunning turnarounds once it acknowledges and confronts an existential threat. Microsoft’s current obsession is the cloud and concomitant new infrastructure delivery and software development models that both threaten its traditional packaged software business and open opportunities to dominate the still-nascent era of SaaS subscriptions, rental infrastructure and retooled, omni-virtualized, service-oriented data centers. Azure is Microsoft’s answer to AWS for public cloud services, but with just-released Azure Stack, it’s bringing the same capabilities to internal IT.

Azure and Azure Stack demonstrate Microsoft’s total commitment to hybrid public/private clouds and together mark the most significant differentiator to it’s biggest cloud competitor, AWS. Like VMware with vCloud/vCloud Air, Microsoft aims for complete compatibility between private and public Azure instances, however unlike vCloud, Azure includes a growing list of application-level PaaS services and, more importantly, enough current and potential customers from its huge Windows Server installed to pose a realistic threat to Amazon’s dominance. Most estimates put Azure as a strong number two in the IaaS market with between 30% and 60% of AWS’s market share, albeit with a faster growth rate. According to Microsoft’s figures — taken with an appropriate amount of skepticism, but which sound plausible — 80% of the Fortune 500 use Azure in some capacity, the service adds over 90,000 subscriptions per month and currently hosts over 1.4 million SQL databases. In the company’s October FY16 Q1 earning’s reportAzure revenues doubled year over year, a rate twice that of AWS. Both services topped that to start 2016. While Amazon reported a near 70% increase in AWS revenue, Microsoft again doubled it with an astonishing 140% increase in Azure revenue.

Microsoft’s strategy to continue the growth is an all-in bet on hybrid cloud, which it sees addressing business concerns like infrastructure, application and transaction latency, data sovereignty and control regulations and needs for customized infrastructure that can’t be met in a public, shared-services environment. Its solution, via Azure Stack, is to bring Azure inside the enterprise. Azure Stack provides full private-public cloud compatibility for developers and ISVs (common APIs and automation tools), business analysts (consistent design patterns and service elements) and IT (the same management console, admin constructs and access controls). This is possible because Azure Stack uses the same code base as public Azure: the internal differences primarily occur at the hardware level to account for idiosyncrasies of Azure’s much larger scale and occasional use of one-off, non-commercial hardware.

Azure public vs. private service comparison. Source: Microsoft

Although we’ve heard hybrid cloud stories before, at a private briefing with a small group of analysts and journalists, I was struck by how comprehensive Microsoft’s Azure vision actually is namely the ability to run a complete Azure PaaS in a private data center. Indeed, an important customer segment for Azure Pack isn’t enterprises at all, but service providers that can customize a base Azure cloud for specific industries and application categories or provide hosting in underserved parts of the world where Microsoft doesn’t have a regional presence. The tight public-private integration was driven home during hands-on labs using the existing Azure management portal and where Azure Stack running on a local (very powerful) workstation looked like just another cloud region when it came time to deploy services. Everything, whether JSON service templates on Github or PowerShell automation scripts, worked the same regardless of the target Azure infrastructure.

Still Work in Progress

Although eminently useable, Azure Stack is far from production worthy: this week’s announcement is just the first Proof of Concept (PoC) preview release that contains a small subset of public Azure’s menu of services. While Microsoft hasn’t publicly detailed features included in Azure Stack, slides presented at the private briefing indicated that few of Azure’s PaaS services made the initial cut, the notable exception being the Web Apps Service. Azure’s Mobile and IoT services will have to wait and some requiring sizable infrastructure like HDInsight and Machine Learning may never be included with Azure Stack.

Azure Stack architecture. Source: Microsoft

Azure Stack might run on a single machine, but developers shouldn’t expect to install it on their PC, the PoC hardware requirements are significant. You’ll need at least a 12-core machine with 96 GB and four disks, however expect to wait. Our lab machines had over twice this capacity and still bogged down on certain operations. A minimal Azure Stack deployment will require four 16- to 32-core servers with at least 128 GB and multiple disks. Like VMware EVO RAIL, Microsoft expects most deployments to use purpose-built hardware pre-integrated with the Azure Stack software, although a DIY option is possible for those willing to closely hew to an as-yet-to-be published hardware compatibility list.

My Take

Azure Stack represents the logical endpoint of a hybrid cloud strategy: the same technology stack available for rent as a shared service or for sale as a private cloud. While not uniquely qualified to “bring the full power of a true hybrid cloud platform” to market as Mike Neil, CVP of Enterprise Cloud for Microsoft says in announcing the preview, I would agree that it’s one of a handful of companies that can. Indeed, given Microsoft’s presence in enterprise data centers and expertise running one of the world’s largest suite of cloud services, it’s certainly the best positioned.

Azure Stack solidifies Microsoft as the safe, familiar enterprise cloud alternative to AWS. Don’t expect Azure to unseat AWS as the kind of cloud anytime soon, however its mix of familiar services (AD, SQL Server), developer support (Visual Studio, .NET) and seamless hybrid infrastructure integration means Azure will appeal to a much broader enterprise audience. Microsoft’s Azure strategy presents much more significant threats to the two other oft-mention hybrid cloud alternatives: OpenStack and vCloud. Although both will have adherents in particular niches like academia and HPC (OpenStack) or organizations already committed to VMware’s vision, neither can foreseeably deliver the gamut of platform services across public and private clouds to a customer base already comfortable with many of the management and development tools.

Key to assessing how fast Azure picks up momentum will be the pace of adoption by service providers and OEM partners, not enterprises. If Dell, HP, Lenovo and others flood the market with a variety of Azure-integrated products, perhaps in conjunction with a branded shared service, ISPs build regional Azure clouds for emerging markets and industry verticals and trusted channel partners push Azure to their mid-market customers, forget VMware or IBM, even Amazon will take notice.

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